Palantir Stock Surges After Strong Earnings: Is $30 Too Low?

Key Points

• PLTR stock is surging the day after the company delivered a stellar earnings report that included increased full-year guidance.
• The company is on track for inclusion in the S&P 500, a move that would increase institutional exposure to the stock.  
• Analysts continue to have a mixed outlook for PLTR, with many believing the stock remains fundamentally overvalued.  

Palantir Technologies Inc. NYSE: PLTR stock is up more than 11% in pre-market trading after it released its second quarter 2024 earnings after the market closed on August 5, 2024. By any measure, this was a strong report. But will it be enough to silence critics that PLTR stock is too expensive? 

Earnings reports frequently focus on the headline numbers, and Palantir delivered a strong report in that regard. Revenue of $678 million beat analysts’ expectations by 3.9%.  

But those numbers look significantly stronger when you look at them year-over-year (YoY). Revenue was 27% higher YoY. That growth took place in both the company's U.S. government business (up 24%) and its U.S. commercial business (55%). The company also posted 83% U.S. Commercial growth.  

In the quarter, the company closed 27 deals valued at over $10 million, translating to a 41% growth in customer count.  

On the heels of those results, the company increased its revenue guidance for the third quarter and the full year.  

Earnings May Seal the Deal With the S&P 500 

Investors who follow Palantir know that the stock was rebuffed for inclusion in the S&P 500 for the second time in June 2024. The next opportunity for the company will come in September. Earnings of nine cents per share beat expectations by one cent and were 800% higher YoY.  

In November 2023, Palantir met the threshold for inclusion in the S&P 500 by posting its fourth consecutive positive quarterly earnings. These results confirm that the company is not only staying profitable but also growing profits at a strong pace.  

In an interview on August 5, Palantir chief financial officer (CFO) David Glazer confirmed, “With these results we maintain our eligibility for the S&P...It’s the S&P’s call.” 

As Palantir’s investors understand, inclusion in the S&P 500 will likely bring more institutional investors into PLTR stock. Currently, institutions hold approximately 45% of the stock’s float.  

Why Palantir? 

Even for those who are well-versed in technology stocks, particularly software stocks, Palantir can be difficult to understand. However, as analysts focus on monetizing AI, it’s critical to understand Palantir’s unique role in making this happen. 

Many people understand the role that large language models (LLMs) play in deploying AI applications for enterprises. Palantir does offer its own LLM through its AIP platform, which is gaining traction. However, the company also delivers the infrastructure that LLMs need to help businesses make critical decisions. That’s where the company’s ontology comes in. That ontology, found in its Gotham and Foundry platforms, enables its customers to gather meaningful insights from whatever LLM they may use. As I've heard it described, LLMs are like early automobiles; Palantir is building the roads and bridges that make those cars go.  

That's important because Palantir is going to market with a two-pronged strategy that focuses on ensuring it offers a value proposition to its customers. Because of that value, the company is attempting to capture a massive market share in what will be a trillion-dollar market in the next 10 years.  

Is a $30 Price Target for Palantir Too Low? 

Dan Ives of Wedbush has been one of the most bullish analysts regarding PLTR stock. In 2023, Ives referred to Palantir as the “Lionel Messi of AI” and issued a $30 price target on the stock. Ives has since increased that target to $35. After the earnings report, the analyst reiterated his Outperform rating on PLTR and raised his price target to $38. 

However, not all analysts share that outlook. The Palantir analyst forecasts on MarketBeat show that two analysts have issued price targets for PLTR that are far below the price the stock was trading at prior to the earnings report.